If you are surprised by China’s decision to buy 10pc of Thames Water, don’t
be. If you’re worried about the world’s biggest authoritarian state flexing
its financial muscles here, too late.

First, the Chinese, authors of state capitalism, can spot a decent investment when they see one and with $1.7 trillion of foreign exchange holdings the country needs somewhere to put all the cash.

China Investment Corporation, a state sovereign wealth fund, is poised to take 10pc of Thames Water which won’t give it control of London’s plumbing (the loony conspiracy fringe can rest easy) but it will generate a typical utility return of a steady income flow at low risk.

As a nation with an enormous surplus, this is exactly the sort of investment China will be seeking more of, encouraged by our Government.

George Osborne has been in the Far East this week to cement closer business and financial ties between the two countries.

If a new Thames Estuary airport is ever built, expect plenty of Chinese money behind it.

As early as 2008, The Sunday Telegraph revealed how China’s central bank had amassed share stakes in FTSE 100 companies worth £9bn including Tesco, Unilever and HSBC.

The Chinese have been buying stakes in blue chip companies throughout the financial crisis as share prices have been struggling. But they are typically holdings of 0.75pc-1pc so have remained below the disclosure radar screen.

China already owns large UK-based companies outright and employs thousands of Britons directly. Huawei, for instance, is one of the UK’s biggest communications and information technology companies alongside BT and has been here for years. It is just one of hundreds of UK-based companies owned or invested in, by China.

So far China has proved to be a good owner of, and investor in, UK assets. The country has a natural tendency to look to the long term. There is no evidence that as a shareholder China is remotely interested in undermining the normal democratic rights of other shareholders or wants to circumvent corporate governance standards.

But countries such as the US take a far less relaxed view of Chinese investments and are openly hostile to the Communist state acquiring American assets.

Should we be more cautious?

The answer is almost certainly yes. China’s model of state capitalism, including its deliberate policy of keeping its currency artificially weak, undermines and distorts free trade while its state subsidy of companies now competing on the world stage undermines Western notions of free and fair competition.

A very unlevel playing field is being established which we will regret.

But regardless of possible ulterior motives for China’s expanding network of overseas investments, the Government here should be doing more to encourage our own domestic investors to spend so we don’t have to rely on Chinese largesse.

It’s not that we’re short of cash. Companies and pension funds are sitting on billions but are either too nervous to invest in areas such as infrastructure, or the tax and legislative system dissuades them.

Before we welcome China, we should make use of our own financial fire power.